I managed to solve the recursion error. It was a layer that was incorrectly called in code ("august base" instead of the correct "august_base" when the filename was "august_base.png"). The same error also appeared in-game when the sprite was called. Solving this error also made layer groups declared with "auto" appear.
That said, if the error appears once it still bricks your layeredimage tool until the game's persistent data is removed. It would be great if there was some kind of error message but the tool doesn't get bricked, as this kind of slipups is probably a common occurence during the dev process.